A senior US officer and former Nato commander sparked outrage in the Netherlands today by declaring that gay soldiers in the Dutch military were one of the reasons for the Srebrenica massacre, the worst act of mass murder in Europe committed since the second world war.

The Dutch government and military responded with anger and contempt after General John Sheehan, a retired marine corps officer who was Nato's supreme commander at the time of the 1995 atrocity, told a US Senate hearing that gay soldiers in the military could result in events like Srebrenica.

In July 1995 Bosnian Serb forces overran the Bosnian Muslim enclave under the protection of Dutch UN peacekeepers and killed 8,000 Muslim males, making the event a traumatic national disgrace for the Dutch.

Following recent remarks from Robert Gates, the US defence secretary, that Europeans had gone soft, Sheehan argued that changes after the end of the cold war had reduced Europe's appetite for combat.

"They declared a peace dividend and made a conscious effort to socialise their military – that includes the unionisation of their militaries, it includes open homosexuality. That led to a force that was ill-equipped to go to war," he said.

"The case in point that I'm referring to is when the Dutch were required to defend Srebrenica against the Serbs. The battalion was under-strength, poorly led, and the Serbs came into town, handcuffed the soldiers to the telephone poles, marched the Muslims off, and executed them. That was the largest massacre in Europe since world war two."

He added that the Dutch chief of staff had told him that having gay soldiers at Srebrenica had sapped morale and contributed to the disaster.

"Total nonsense," said General Henk van den Breemen, the Dutch chief of staff at the time. The Dutch embassy in Washington dismissed the US officer's argument as worthless, Maxime Verhagen, the Dutch foreign minister said that it was not worth commenting on, and the Dutch defence ministry voiced incredulity.

"It is unbelievable that a man of this rank is stating this nonsense, for that's what it is," said the ministry.

"Scandalous and not worthy of a soldier," added Eimert van Middelkoop, the Dutch defence minister.

The UN war crimes tribunal for former Yugoslavia in The Hague – where the Dutch government sits – has found that the mass murder in Srebrenica was an act of genocide, the only one in Europe since the Holocaust.

Sheehan argued that openly allowing homosexuals in the military was part of a post-cold war "socialisation" process in Europe that had concentrated on peacekeeping in the belief that Germany would not attack again and that Russia was no longer a threat.